Public Bill Committee

[Hugh Bayley in the Chair]

Clause 4

Electricity supply levy

Question (this day) again proposed, That the clause stand part of the Bill.

Joan Ruddock: I was in the middle of dealing with questions about EU emissions trading scheme receipts asked by the hon. Member for Wealden and had explained, somewhat to the dismay of certain members of the Committee, that the problem was that we did not yet have a decision from EUROSTATthe EU statistical agencyon how EU ETS receipts should be classified in the public finances. For that entirely reasonable reason, we were not able to publish them in advance of such a decision, but we had tried to provide some information. That has been donethe hon. Gentleman is aware of thisby including the receipts in other taxes and royalties in that line in the relevant tables in Treasury publications. I understand why he considers that unsatisfactory, and we have gone further to indicate the sorts of moneys involved. Those moneys are put as public finances forecasts in the Budget and pre-Budget report and are based on the likely number of allowances and the secondary market price for carbon.
The hon. Gentleman may or may not be aware that the 2009 pre-Budget report noted that, to date, UK carbon auctions have raised more than £350 million and that future revenue was set to rise to about £2 billion in 2013-14. Those moneys are contained in the Consolidated Fund, and as with other moneys, which are raised in a variety of ways, they are, of course, used to fund the Governments programmes. They therefore constitute public finance. If we took the money from those sources, we would essentially be using public money directly to fund the CCS projects, but our preference is to put the obligation on electricity suppliers, paid for by the suppliers in the form of a levy. I do not know whether the hon. Gentleman seeks further clarification, but I assure him that that is as much information as I can provide him with.

Charles Hendry: I am very grateful to the Minister; she has been genuinely seeking to be helpful. On the UK carbon auctions to which she refers and the figure of £2 billion for 2013-14, it would be helpful if she let us havenot necessarily immediately because she may not have itthe corresponding figure for each year from now for the whole Budget period. As a result of auctioning the EU ETS allowances, do the Government expect to raise other amounts that would come to the UK on top of those figures or would that be the totality of them?

Joan Ruddock: Unless I stand to be corrected, I imagine that that would be the totality of them. It is not obvious to me where else moneys would come from. The hon. Gentleman will be aware of the EU raising finance through allowances from the new entrants reserve, which will fund some EU projects, but that is a separate matter, although the UK will benefit because we will undoubtedly have EU-funded projects in the UK. That is our expectation.
I think that I have explained the situation and given as much information as possible, but it is important to distinguish, for the matters covered in the debate, the fact that the Governments position is not to take public funds directly to fund projects 2 to 4and, indeed, project 1 nowbut to do that through the levy system. Of course, that is the matter that we have been debating.
I was asked about the contract for difference, and I said that I would attempt to answer that question before going on to the main stand part debate. The hon. Member for Wealden raised the matter and related it to the carbon price. He is right to point out the benefits of a contract for difference related to the carbon price. Clearly, over time, the amount of payment through the levy could therefore conceivably reduce, which would be an obvious advantage.
We have consulted on the matter and two proposals were put last year. One proposal was the contract for difference, linked to the quantity of CO2 abated, and the other was to make an additional payment linked to the amount of CCS electricity supplied. We need to do further analysis with the Treasury, and we will, of course, need to take a decision in time for the launch of the competition for further projects. So there is no final decision on that, but we share the hon. Gentlemans view that there could be an advantage in the contract for difference linked to the carbon price.
I also want to raise a matter discussed this morning. Questions were asked about which suppliers would have to pay the levy. The debate was about large, small and local companies and so on, and in seeking to clarify, I indicated that the levy would be imposed only on licensed suppliers. That is indeed our preferred course.

Simon Hughes: But.

Joan Ruddock: But we do, of course, have to consult. Therefore, it was premature of me to say definitively that we will do it that way. For the sake of accuracy and clarity, let me make it clear that that is our current intention, but it will be subject to consultation.

Anne Main: I thank the Minister for giving way, as I raised that point with her earlier in her speech this morning, when she said that perhaps very large suppliers would have a different tariff. Does she imagine a multi-tiered approach to levies, perhaps going from the largest to the smallest provider?

Joan Ruddock: The hon. Lady is confusing suppliers and supplies. I think that she is referring to when I mentioned representations from intensive users. It is the people receiving the largest amount of supplies who have made representations that, for example, there could be a ceiling on the amount of supplies that should suffer the levy. That goes back to the suppliers, but those who use the electricity have made those representations. This is not a distinction between large and small supply companies.

Brian Binley: I am grateful to the Minister for that explanation. I asked about and relationship between suppliers and the levy on big users, because costs proportionately fall more heavily on the smaller than on the large business. I asked but did not get a clear enough answer. She has now clarified the situation to the extent that I need more clarification with regard to my question.

Joan Ruddock: Everyone is suggesting that they are confused. Let me be clear: I am not saying anything absolute on this matter. I simply raised this issueregrettably perhapsand admitted to the fact that we have received representations from people who are heavy users and want some limit on how the levy paid by the supplier companies will impact them. I am not in a position to give the hon. Gentleman any further information. We have provisions in the Bill, and I have made it clear that we have no intention to exempt at the moment, despite representations from a variety of sourcesincluding renewables, which we also discussedwith the sole exception of exported, not imported, electricity. We will not be looking to exempt. That is the position now, but things may change substantially; we are in a new field altogether, as regards the economics and the progress of the project. I am afraid that I cannot help the hon. Gentleman further, and I hope that I am not making things more complicated by what I have just said.

Tobias Ellwood: Will the Minister give way?

Joan Ruddock: I will, but we are in danger of complicating things and not moving any further. There is a limit on what I can say at the moment, but I stress again that we will have to undertake further consultation, including on the regulations.

Tobias Ellwood: It is exactly a question about consultation that I want to ask. Who will conduct the consultation? Does the Minister envisage the new office of carbon capture and storage taking that on, or will the Department push it through?
Once we complete our debate here and the Bill, hopefully, becomes an Act, the details of the discussions will be lost until we get more direction from either the Minister through a statement or the new office. If a company that supplies electricity has a mix of one third-two thirds, where one third comes from a renewable source that produces no CO2 emissions, will that have any effect on the size of its levy?

Joan Ruddock: I have made it clear that there is absolutely no intention at the moment to exempt the supply that is derived from renewable sources. I have made that absolutely clear throughout the debate; it is not an area of confusion.
On the other question that the hon. Gentleman posed, the consultation will be a formal Government one in the normal way. The Government will set out proposed plans for regulations, and they will be part of a formal Government consultation, which will take the normal 12 weeks. The Government will, of course, publish the results, as is normal, and respond. [Interruption.] Perhaps I am not the one to sit down. I think and hope that I have succeeded in answering the questions that were outstanding at the point at which we were interrupted.

Simon Hughes: May I remind the Minister of one? I asked her about the cost. What will be the total amount of the levy and the cost of the project? How much will people have to pay? I would be grateful for her answer.

Joan Ruddock: I have answered the question, but the hon. Gentleman may not have found it sufficient, because all I provided him with was the total sum and the range, which we think, from memory, will be between £7.2 billion and £9.5 billion. That is the amount of money that would be raised by the proposed levy. How that will be disbursed and exactly where in that range we will end up depends on the actual projects and their nature. Until we know that, it is impossible to arrive at the final sums. So I say again that I am honestly giving the Committee as much information as possible at the moment.

Simon Hughes: That is the global cost, but the other question in which consumers will be interested is what it will add to the bill. Can the Minister give us parameters for that?

Joan Ruddock: I think I can do that. We have suggested that we are probably looking at a 2 to 3 per cent. increase in bills, looking towards 2020about £15 to £17 per annum per consumer. There will be no immediate effect on bills and, probably, no significant effect before 2015, which is quite far off. We are concerned about any addition to customers bills, but we have to see this in the round and see what we can provide for customers. Energy security is, very topically, what consumers will want and we believe that this is a substantial way of providing that energy security and appropriate energy mix.
The clause gives the Secretary of State the power to raise funds, based on the provision of financial assistance to CCS demonstration projects, which could include support for the retrofit of CCS to the full capacity of the power stations hosting the demonstration projects, should a decision be taken to do so in the future. Those funds will be raised through the charging of a levy on electricity supplies, with the levy to be paid by electricity suppliers.

Tobias Ellwood: I am grateful to the Minister for giving way and appreciate that I am testing her patience early in the proceedings. If we create a technology that is not only successful here but is exported to other parts of the worldwhich I think is what she implied earlieris there any mechanism by which the taxpayer would benefit by getting some form of rebate? Is there any waythrough patents or other methods and financial structuresin which this amount, which could be up to £9.5 billion, could be repaid to the taxpayer?

Joan Ruddock: The taxpayer will get value for money, if this succeeds, in energy security. The taxpayer would get benefits from any form of exports; there are jobs in exports. I have no doubt that there are benefits for taxpayers. I do not envisage at the momentthough one can never say nevera means of clawing back money. If under the contract payments are made according to differences in the carbon price, that will properly reflect how well things are going in the market. We are going down the route of a levy only because we understand that these projects would not be commercially viable unless the payments were made. Therefore, we have to be prepared to commit that money and to bear the burdenI have indicated that it will not be huge, but there will be a small increase in consumer bills in due coursebecause of the benefits that will accrue overall. We would not envisage trying to claw back; we are trying to give people confidence in going ahead with these projects, with support. We want to do that as efficiently as possible and at the best cost. None the less, I do not anticipate what the hon. Gentleman suggests.
The clause sets out a non-exhaustive list of matters that may be covered by the regulations governing the levy mechanism. In particular, provisions allow the regulations to prescribe to what types of supplies the levy will apply and the suppliers who will be liable to pay the levy. Provisions under the clause will also allow for different rates of levy to be set in different cases. The clause allows for measures to apply relating to the enforcement of the levy, including the penalties for late or non-payment.
Before making regulations under the provision, the Secretary of State must consult the administrator and such other persons as he considers appropriate. Importantly, regulations must be laid in draft and approved by both Houses of Parliament before they can be made, ensuring that Parliament will have the opportunity to scrutinise the detailed provision made about the levy. The provisions in the clause are required to set the framework for the levy mechanism needed to support UK demonstration of CCS.

Charles Hendry: We have had a useful debate, and I am grateful to the Minister for the extra clarification. We will not seek to block the clause, but we would prefer funding for the developments to come through the EU ETS. I recognise that she has given further guidance, but we think that that is a new source of funding that does not add to consumers bills at this time. Consumers are already anxious about their bills, and an additional levy must inevitably cause some complications.

Joan Ruddock: Does the hon. Gentleman not follow my argument that if he were to take money that has gone to the Consolidated Fundreceipts from auctionshe would deprive other areas of public finance, such as schools and hospitals, which are very much needed and will continue to be needed in the future? Whichever way he looks at it, the small amount that the levy would put on peoples bills would be completely offset by his proposals directly to take public funds, which would be much worse.

Charles Hendry: What has been clear in our discussion is that the funding is opaque. If we look at the budget book and the documentation, it is difficult to see exactly how much there is. Today, for the first time, after months of asking for information, we have had some detail on how much money is assumed to come from the EU ETS. We need to look further at how that is allocated. We cannot do that at this stage, and we do not seek to do so. However, it is a means of avoiding a levy on consumers, which would have been nice.
The Government are determined to pursue the levy approach. We will not seek to block that, because, in the event that money is not available through the EU ETS, it provides certainty to industry that funding will be available.

Question put and agreed to.

Clause 4accordingly ordered to stand part of the Bill.

Clause 5

The administrator

Question proposed, That the clause stand part of the Bill.

Brian Binley: In our debate on clause 4, the Minister saidwe all welcomed itthat the intention should be set out in the Bill so that it is clear. I would hope that the same could be said about clause 5, but I fear that its intention is not clearly set out, and therein lies my concern.
Under the clause, the Government intend to change the authority that is responsible. I accept that, and it seems sensible that we should have an authority responsible for the whole clean coal issue. I think that we would all welcome that, but what changes have the Government thought about? What is the time frame for the changes, and what sort of authority will it be? Will it be a regulator? We need to know more about that.
My real concern, however, is the explanatory notes, which state that the clause gives the Secretary of State power, through regulations, to transfer the function of administrator to another body, including to himself or, indeed, herselfa further growth in ministerial power over a rather sensitive area. Does that give the Secretary of State the right to increase or change the levy, and, if so, in what way? We need to understand that, because levy is simply another word for taxation. What powers would it give a Secretary of State? I assume that it would give all the powers given to the authority, but I want that to be clarified. What do the Government envisage if the measure is enacted? If they do not have a view, I wonder why this provision is in the Bill.

Anne Main: My hon. Friend makes a very interesting point about this quite complex situation. If someone is unhappy about the operation of the authority, to whom do they appeal if the powers have been given back directly to the Secretary of State?

Brian Binley: Given the questions that I am asking, I fear that I am not competent enough to answer my hon. Friends question, but no doubt the Minister has taken it on board and will be kind enough to respond. There are serious concerns about the inclusion of the phrase in the Bill. The Government must believe that there might be a need to transfer power to the Secretary of State. Therefore, we need to know why that might be necessary. Will the Minister be kind enough to make the clauses intentions clear?

Joan Ruddock: The provisions relate to the administrator of the CCS financial support mechanism. A number of elements make up the financial support mechanism: the raising of funds through a levy on electricity supplies, the making of incentive payments to CCS projects and the monitoring of the assistance schemes under which assistance is provided. The elements clearly create a need for an administrator to carry out the functions necessary to administer the levy and payments to projects. We believe that Ofgem, the regulator of the electricity supply industry, is well placed to carry out that role.
The clause therefore appoints Ofgem as the administrator. At the same time, it provides, as the hon. Gentleman said, that the Secretary of State has the power to transfer the functions of the administrator to another public body if required. That will enable the Secretary of State to take account of any future change in circumstances that might make it appropriate to transfer the function of the administrator to another body.
In our evidence sessions, we discussed whether a new body would be necessary in the future; I think that the Conservatives had proposed that new body. At the time, I said that the creation of such a new body was premature, but this is a long-term programme that takes us to 2020, conceivably with levy payments and conceivably adding retrofit payments. We are therefore probably talking about a period of potential financial support of, say, 15 years. Therefore, it is clear that we need to have an open mind about what might be necessary in the future. However, let me be absolutely clear that it is our settled view at the moment that Ofgem has the appropriate expertise, and indeed Ofgem is being appointed under this clause.

Charles Hendry: Does the Minister not accept our concern that this measure makes the Bill rather narrow? We understand that the funding mechanism will be fundamental to the projects being developed. However, there are many other aspects, in terms of organising the funding mechanism and its strategic deployment, that will have to be overseen, and there will have to be an organisation to do that. Therefore, does it not make sense to make provision for that, rather than perhaps needing new primary legislation to set up another body when the matter becomes much more urgent? I think that we can all see the need for that new body. Industry sees the need for it, so would it not be sensible simply to have the power to create it available?

Joan Ruddock: I will be happy to consult officials outside the Committee, but I am not aware that there would be need to be primary legislation to set up another body that might have the functions that the hon. Gentleman has just referred to. This measure is narrow and specific for good reason: to ensure that the moneys can be raised and disbursed appropriately and that monitoring can take place. We believe that Ofgem is the appropriate body to do that. Indeed, we have no plans at this time to make any subsequent transfer of functions.
Given the time for which we expect the projects, and what follows from them, to run, we believe that it is reasonable to have this flexibility, should it be required, although we do not currently anticipate that it will be needed. Indeed, some of the other functions that the hon. Gentleman has referred to could probably be covered by means that did not require primary legislation nor the transfer of these particular powers, because they are specific powers.

Brian Binley: The Minister is being immensely generous in giving way and I hope that we are reacting in that spirit.
The Minister will remember that we scrutinised a Mrs. Jenny Saunders, or a Miss Jenny SaundersI do not know her marital status, actually. I questioned her on the efficacy and efficiency of Ofgem. In particular, I asked her whether she felt Ofgem was doing a reasonable job. I think that the information that I got back was that she felt that it could improve considerably.
Is the Minister therefore happy to give this power to Ofgem, or does she intend to ensure that Ofgem ups its efficiency in respect of the task she is giving it?

Joan Ruddock: My hearing of most of the witnesses, including Ms Saunders, was that they were saying that Ofgems functions may have left a lot to be desired in the past. However, I think they all said that it was now on a better track and had improved in recent years. We will debate at a later stage the ways in which Ofgem might take on board climate change and energy security.
I think that we are all of the view that Ofgem has perhaps not always performed as we have wished it to, but considerable improvements in performance have occurred and new directions are being pursued that are in line with Government wishes. We are therefore confident that Ofgem, which has already set up a new unit to cover a number of functionsof which the issue under discussion will be oneis equipped, experienced enough and able to do the job.
I repeat that the provision is narrow, as it needs to be; it is the task that Ofgem needs to carry out. It is the body that we are appointing through the Bill to do the relevant tasks. We do not have plans at present to change that, but we will allow ourselves the flexibility. Whether there is a need for a different public body with much wider functionsthe kind to which the hon. Gentleman has referred, perhapsand whether that would require primary legislation, will be part of our considerations in the rolling review.
I am sure that, as we progress, we will be able to make those decisions subsequently; they do not need to be taken in this Bill at present. I think that I have indicated clearly enough that the clauses provisions are required, as they specify who will carry out the central function of administering CCS financial support.

Brian Binley: My apologies, but I did raise the issue of the information in the explanatory notes. Will the Minister refer to them? The possibility of transferring the power to the Minister, whoever that Minister might be, is a pretty important factor in this discussion.

Joan Ruddock: The hon. Gentleman and I will share the view that it is always better not to transfer additional powers of this kind to Ministers, but we have to have that flexibility should it be necessary. I have, however, indicated that we have no such plans. We could have gone along with the proposed contractual arrangements for the first project where the relationship is directly with the Secretary of State and the developer for CCS projects. We have put Ofgem in the position to do the work involved, which is important to us. We think that Ofgem is the right organisation to do it and we did not include the provision to suggest that we want to make a transfer. It is there as a protective clause for the future.

Brian Binley: I welcome the Ministers answer, but I did ask about what sort of circumstances she envisaged the power being used in. If there are no such circumstances, why is the power in the explanatory notes and why does it exist?

Joan Ruddock: It is in the explanatory notes because it is in the Bill. I have no idea what sort of circumstances might arise, but the hon. Gentleman will understand that the expert civil servants who advise us on the issue believe that we should have such a clause. The drafters of Bills often advise that, too. I am content with that and I am not ashamed to say that I cannot enlighten the hon. Gentleman on this point at this time.

Clause 5accordingly ordered to stand part of the Bill.

Clause 6

CCS demonstration projects and additional CCS use

Michael Weir: I beg to move amendment 16, in clause 6, page 5, line 23, leave out coal-fired.

As it presently stands the bill restricts CCS demonstration projects to coal-fired projects. This amendment will remove the reference to coal and allow other projects to be considered.

Hugh Bayley: With this it will be convenient to discuss the following: Amendment 17, in clause 6, page 5, line 28, leave out coal-fired.

As it presently stands the bill restricts CCS demonstration projects to coal-fired projects. This amendment will remove the reference to coal and allow other projects to be considered.
Amendment 18, in clause 6, page 5, line 37, leave out coal-fired.

As it presently stands the bill restricts CCS demonstration projects to coal-fired projects. This amendment will remove the reference to coal and allow other projects to be considered.
Amendment 19, in clause 6, page 6, line 1, leave out coal-fired.

As it presently stands the bill restricts CCS demonstration projects to coal-fired projects. This amendment will remove the reference to coal and allow other projects to be considered.
Amendment 20, in clause 6, page 6, line 2, leave out from scale to end of line 5.

As it presently stands the bill restricts CCS demonstration projects to coal-fired projects. This amendment will remove the reference to coal and allow other projects to be considered.

Michael Weir: Thank you, Mr. Bayley. These amendments stand in my name and are supported by the Conservative party.
The purpose of these amendments is self-explanatory, but it is an important issue at the heart of the Bill. It is now fairly clear that the winner of the first competition will be a coal-based plant. There are only two left: Longannet and the E.ON plant based possibly at Kingsnorth.
In discussing clause 1 this morning, the Minister stated that the next four plants were intended to include two pre-combustion plants. However, clause 6, as it currently stands, makes clear that the demonstration projects will be for coal-fired generation only, as will the additional future funding that may be available. The effect is to exclude the possibility of CCS demonstrators being on a gas-fired plant; any pre-combustion plant would have to be coal-based and not gas-based. I believe that that is short-sighted and that we should leave open the possibility of demonstration plants being either coal or gasor other possibilities, such as biomass or oxyfuel.
I would remind the Committee that we had the opportunity to get ahead of the field with the Peterhead scheme, which was a joint venture involving BP and Scottish and Southern Energy. I have talked about that many times and I will not bore the Committee by going into great detail. Considerable investment was made in that development, which would have demonstrated the use of carbon capture and storage on a gas-fired station. It would also have generated energy from hydrogen as well as the storage of the captured CO2 in the Miller oil field. As a result of indecision, continual delay on the competition and the final decision to exclude pre-combustion schemes by the UK Government, that opportunity was lost and is now being pursued in Abu Dhabi.
We run a real danger of doing the same again by putting all our eggs in the one basket with this clause. When the Minister was asked about this issue in the evidence session, she said that coal was the most carbon-intensive fuel and that a solution was needed. No one here would disagree with that and, as the hon. Member for Northampton, South never ceases to remind us, there are many, many years worth of coal under our ground. We need a solution that will use that coal for energy security, if nothing else.
When asked specifically about gas, the Minister restated the importance of coal but added:
It is not just what we can learn in this country; we need to learn from what is happening in other countries as well.[Official Report, Energy Public Bill Committee, 7 January 2010; c. 111, Q244.]
She went on specifically to mention what the Norwegians were doing with gas CCS.
I would draw Members attention to the excellent paper submitted to the Committee by Professor Gibbins. In paragraph 13, he states:
With respect to technology demonstration elsewhere, conditions are more relevant in Norway, but low demand there for fossil fuel may hinder rapid development of gas CCS at scale. Conditions elsewhere in the world where gas with CCS is being discussed, notably the Middle East, are rather different with respect to ambient conditions and gas and CO2 prices, so optimum technology approaches may also be different there.
In effect, neither of these may be suitable for either the conditions in the UK or the speed with which we need to get gas CCS up and running. But it seems to me, in respect of the Ministers response, that exactly the same argument can be made about coal. Both the USA and China, for example, are pressing ahead with coal technology, mainly due to the energy mix in the countries. Indeed, the professor indicated that the first commercial plant may well be in China.
We need to look at what technology would deal with the decarbonisation of our energy supply to meet our carbon reduction targets. We undoubtedly need to have CCS for coal to unlock our vast coal reserves, but we also need to look urgently at the decarbonisation of gas.
The point was made forcefully by Professor Gibbins during the evidence sessions when he said:
The reason why the Bill needs to take in natural gas is that it seems likely that because we now have these quite stringent targets for 2030, we will have to fit a significant amount of natural gas plant with carbon capture and storage in the 2020s. To be able to plan for that, you need to have demonstrated the technology and to have the reference plants to look at and say, This is how its done, and to be absolutely clear about what youre doing. Thats why you would work on gas.[Official Report, Energy Public Bill Committee, 5 January 2010; c. 44, Q94.]
Members will be aware that a large part of our current generating capacity is gas-fired. This morning, the hon. Member for North Southwark and Bermondsey said that it was 41 per cent., while Professor Gibbins said that it was over 30 per cent. Whichever it is, it is substantial and unlikely to change in the immediate future. Indeed, I looked at what was happening at the moment, and 33 new applications for gas plants have already been granted, with a further nine being under considerationperhaps as much as a further 10 MW of generation capacity. Even as we move towards a low carbon economy, we clearly have many existing and proposed gas stations; equally, those newer gas stations will still be operating after 2020. As Professor Gibbins states,
while the building of new coal generating capacity before and after 2020 is still uncertain, so it is probable that gas fired plant will be the source for a major part of UK power-sector emissions of fossil carbon dioxide in the 2020s and beyond.

Simon Hughes: I want to confirm that the best Library note figure is that 43 per cent. of electricity is currently produced by gas, which is in the same ball park as the hon. Gentlemans information.

Michael Weir: I thank the hon. Gentleman for that intervention. The point standsit is a substantial amount and is going to be for the foreseeable future.
I accept that, as the Minister also made clear in evidence, new gas stations emit less CO2 than coal, and indeed older gas stations. None the less, we need to have CCS technology for gas in place by the 2020s. The demonstrator, however, will not be up and running until 2014 and some of our witnesses were very sceptical as to whether that target would be met, which means that time is running out for gas technology. I draw attention particularly to what Professor Gibbins says at paragraph 6 of the memorandum. Forgive me, Mr. Bayley, as it is a lengthy and somewhat complicated quote, but it is important:
The Committee on Climate Change suggests that, for the entire UK electricity fleet (i.e. an average of all generation sources, fossil and non-fossil) an overall electricity emission intensity of 70 gCO2/kWh or less will be required by 2030 (compared to an average value of around 500 gCO2/kWh now). This implies that fossil fuel plants should on average be emitting around 100 g CO2/kWh, with the lower UK fleet average resulting from the inclusion of renewables and nuclear as very low carbon options. Individual gas power plants will emit of the order of 350 gCO2/kWh at full load, but significantly more if they are running at part-load or varying load to compliment and support wind-generated electricity. Even gas-fired CHP plants can only approach an electricity emission intensity of 200 gCO2/kWh, and then only for ideal operating conditions and location with full heat/electricity matching and with an acceptance of an accompanying CO2 emission from heat production. It is clear, therefore, that any gas power plants running for extended periods in 2030 (as well as coal plants) will need CCS in order to achieve emissions of 100 gCO2/kWh or less.
That is the important point: we will still be using gas plants into 2030 and possibly beyond, and the older a plant is, the more CO2it will emit. Given that older plants in particular may be put over to peaking or emergency duties to back up other sources, they will emit more CO2, if I understand correctly.
The professor goes on to say that we cannot be certain of the position between 2020 and 2030:
but in this uncertainty fossil fuel, and particularly gas, is in effect being used as a de facto insurance policy to keep the lights on if other options fail to deliverand ensuring that CCS is developed in time for widespread rollout from around 2020 is, therefore, the insurance policy to make sure that the UK CO2emission target set by the Committee on Climate Change are met.
It seems to me that we have to take account of gas. We cannot put all our eggs in the one basket of coal, important though I accept coal is.
One other potential problem that in my view shows a slight lack of joined-up thinking is the overarching national policy statement on energy, which is of course part of the national planning framework. Section 4.7.1 of that statement, dealing with carbon capture storage readiness, states:
To ensure that no foreseeable barriers exist to retrofitting carbon capture and storage (CCS) equipment on combustion generating stations, all applications for new combustion plant which are of generating capacity at or over 300 MWand of a type covered by the EUs Large Combustion Plant Directive (LCPD)should demonstrate that the plant is Carbon Capture Ready (CCR) before consent may be given. The IPC must not grant consent unless this is the case. In order to assure the IPC that a proposed development is CCR, applicants will need to demonstrate: that sufficient space is available on or near the site to accommodate carbon capture equipment in the future; the technical feasibility of retrofitting their chosen carbon capture technology; that a suitable area of deep geological storage offshore exists for the storage of captured CO2 from the proposed combustion station; the technical feasibility of transporting the captured CO2 to the proposed storage area; and the economic feasibility within the combustion stations lifetime of the full CCS chain, covering retrofitting, transport and storage.
Section 4.7.3 then states:
If the IPC, having considered these assessments and other available information, concludes that it will not be technically and economically feasible to retrofit CCS to a proposed plant during its expected lifetime, then the proposed development cannot be judged to be CCR and therefore cannot receive consent.
It seems to me that that runs a real danger of preventing the future development of gas-fired plant because of the lack of proven CCS technologyunless, of course, we invest and make sure that that technology is available and working. Making an assessment of the technological and economic feasibility of retrofitting the technology to a planning application is impractical and likely to produce a meaningless assessment. Without knowing the costs, it is impossible to specify objectively what is economically feasible.
As I said at the outset, given that the clause as it currently stands only refers to coal-fired generation, anyone wishing to use CCS on gas plants will have to prove economic feasibility without subsidy. I would also point out that as the IPC is due to come on stream before the first demonstrator plant, that will have potentially serious impacts on developing new gas plants.
For all those reasons, I believe that we should accept the amendment to the Bill and ensure that we at least leave open the possibility of CCS from gas and other fuels. We should not be restricted to coal alone; that might have the consequenceI was going to say the unforeseen consequence, but it can be foreseenof serious difficulty in the years ahead.

Charles Hendry: I congratulate the hon. Gentleman on moving the amendment in that way. This is a very important part of the Bill, and how we approach the whole subject is also important. This can either be a rather lame Bill, which moves us forward significantly in some areas but not enough in others, or it can be a very big, bold step forward that will really change how we think about carbon capture and storage. His ambition and ours and that of many other members of the Committee is that we should be looking for the latter. We should be ambitious and create a totally new feel about CCS.
We have, I am afraid, missed the boat once before. The competition was too narrowly focused. We then missed the boat on pre-combustion, and it will be some years before we can begin to catch up in that area. The project in Peterhead that the hon. Gentleman referred to was a very sad loss. It was one of the most advanced projects of its kind in the world and was ultimately lost because of the lack of Government support.
Our challenge must be to not make the Bill too restrictive. We should seize the opportunity, going for the whole range of technologies that may be out there, and doing what we can to make them happen. The challenge for the Minister is to make this a leap forward, rather than a gradual inching forward. The danger is that CCS will develop in coal-fired generation capacity as a result of the Bill, but that its potential development in gas-fired generation will be stifled because it was not included in the Bill. We will then have to wait for another piece of primary legislation to make it possible, while others around the world will develop the technology. We will be stuck in a time warp, because of our failure to make the Bill fit for purpose.
If enacted, the Bill will be there for all time until replaced by something else. The proposed levy is not time-limited, and there is no sunset clause. Unless the Bill is repealed in 30 or 40 years time, the levy will still be imposed, yet its sole purpose is to help to develop CCS technologies at the pilot stage. At that point, it will clearly not be applicable for coal. Even after a decade, it will not be applicable for initial development. However, it would be applicable to gas, and we must ensure that it is as broadly based as possible.
It was important for us to listen to the evidence given last week. Above all, the reason for those evidence sessions is to call before the Committee those who have unparalleled expertise and to hear their views on how to make the proposed legislation better.
I shall quote Professor John Gibbins again. He said:
The reason why the Bill needs to take in natural gas is that it seems likely that because we now have these quite stringent targets for 2030, we will have to fit a significant amount of natural gas plant with carbon capture and storage in the 2020s. To be able to plan for that, you need to have demonstrated the technology and to have the reference plants to look at and say, This is how its done, and to be absolutely clear on what youre doing. Thats why you would work on gas.
In a further exchange, Professor Gibbins was being questioned by the hon. Member for North-East Derbyshire. She said about gas:
So the answer is yesyou would want a separate demonstration project.[Official Report, Energy Public Bill Committee, 5 January 2010; c. 44-47, Q94 and 101.]
Professor Gibbins replied: Correct. The professor is one of the greatest pioneers and developers in the country and internationally. His expertise clearly suggests that we should use the Bill not only for coal but for gas.
We know for certain that carbon capture will be necessary at some point if we are to meet the legally binding carbon reduction requirement of 80 per cent. by 2050. That target can be reached only if we apply CCS to gas-fired power stations. We know that now, so we should use this opportunity to plan for it now and to put in place a mechanism that will make it possible.

John Robertson: The hon. Gentleman makes a good argument. However, I wonder whether there is a priority for coal, whereas gas does not have the same sort of power. If I remember rightly, no one said in evidence that gas would not be used in future, but the priority now and the urgency is for coal.

Charles Hendry: The hon. Gentleman is absolutely right that the urgency is for coal, but the Bill is specific. It is only for coal-fired generation. The Bill specifically excludes gas-fired generation. Although we completely agree that the priority should be for coal, we do not want to exclude gas when it becomes the priority. We agree about the priority, but it is a mistake to close options when we can see that they will happen before long.

Michael Weir: Does the hon. Gentleman not agree that, taking clauses 1 and 6 together, the next CCS demonstrator plant must also be coal-based, thus effectively ruling out gas for the foreseeable future?

Charles Hendry: I thank the hon. Gentleman, who makes a valid point. One aspect, which could be covered now or in a clause stand part debate, is that I am not persuaded that the Bill allows pre-combustion technology at all. My definition of coal-fired generation is that coal is burned to create the electricity; by definition, therefore, that is only post-combustion technology. I hope that the Minister can provide us with some legal guidance to say that, where we gasify the coal and burn the gas, that will still be considered as coal-fired generation. So there are areas where we need greater clarification and guidance.

Joan Ruddock: I can answer immediately: the hon. Gentleman is correct.

Charles Hendry: If that is the case, there is no such definition in the Bill. When the definition of coal-fired generation is given in the Bill, it does not make that clear. I ask the Minister to reflect on that point and to come back with an amendment, perhaps on Report, to change the definition so that it is clear, beyond any doubt whatsoever, that that is the case. We need to address this point not only because of the development of gas, but because a range of other technologies and uses could generate carbon capture and storage and one might wish to assist their development at some point.

Brian Binley: Would not the inclusion of gas give a message that is wider than the message that the Bill gives? Would it not tell industry and commerce that this development is very much on the cards and could happen irrespective of whether the Government want to be involved with any of the funding and so on? If there is a feeling that it could be on the cards, might not industry itself take up the challenge?

Charles Hendry: My hon. Friend could not be more right. The opposite of that point is that businesses looking to develop gas-related CCS anywhere in the world will look at the Bill and say, Britain is simply not interested in doing this, and we are specifically excluded from any funding mechanism. Therefore, they will look to other countries in which to develop gas-related CCS. Once again, it will be a case of catch-up and trying to say, Okay, we had a potential lead; we have lost it. How do we catch up again? The very simple change that is proposed by the hon. Member for Angus would enable us to put that debate to bed, so that people around the world would say, Look, Britain wants to lead in coal-fired CCS, but if you are interested in gas-fired CCS, Britain is the place to look to do that as well.
The other aspect of this issue is that CCS will be relevant to a range of other uses that are not directly related to electricity generation. In particular, I refer to major industrial usersfor example, the chemical industry, including aluminium smeltersthat need to create an enormous amount of heat. Traditionally, they do that by burning coal or gas. In time, if we are to deal with our industrial emissions issues, those users will also need to have CCS.
We need those types of businesses to invest in Britain. If we are considering a cluster approach, we should be looking, for example, at the Humber area and nearby Teesside, which are areas that have incredible expertise in the chemical industry. We should say that one of Britains great strengths would be to have a cluster based on the Humber, where companies investing in the chemical sector could to tap into a pipeline to develop CCS technologies to show that we can undertake some of the most polluting industrial activities in a clean way in Britain. That would be a wonderful message to send to the industrial world, but it would not be permitted if we do not make this change to the Bill.
We are very keen to see CCS technology developed as broadly as possible. However, this is the moment when the Minister has to decide whether she wants to be timid or bold. The funding mechanism is a big step forwardwe completely accept thatbut she can either say that her vision for CCS is for coal or that her vision is for coal, gas and other industrial uses. There is no downside to this change. In the early stages, the levy could be used entirely to assist coal-fired generation, but its use could then be permitted to support other technologies in the future.
The Under-Secretary of State for Energy and Climate Change says that fuel poverty is the issue. There is no issue of fuel poverty in this regard, because the levy would be set at exactly the same level. The Government would then use that income, but when it was no longer required for coal-fired generation, it could be adapted to be used for gas-fired generation. To suggest that the issue is fuel poverty is a red herringit is not correct. We are looking for a bold response from the Minister that will make the Bill much more important and impressive.

Simon Hughes: I support the amendment tabled by the hon. Member for Angus, which is supported by the Conservatives. It is consistent, and accepting it is one of the bold things that we want the Minister to do with the Bill, but not the only one. It would do an obvious thing: as well as changing the breadth and the width of the technological future of CCS in the Bill, it would also increase diversity, which is what Ministers talk about all the time. When we talk about energy security, the phrase that normally follows is, We therefore need diversity of supply. It seems that by going down only the road of coal CCS technology, which, yes, is the obvious one to start with, we are putting all our eggs in one basket.
Although that is the obvious place to start, all the evidence that we have all received makes it clear that we will have significant gas contributions to our energy mix. That produces emissions, too, and can use this sort of technology. Why not get the scientists and the technologists to work on solutions to everything? As the figures make clear, if we can capture and store, which the UK has the capacity to do, emissions from not just coal-fired power stations but from other energy sources, we could deal with 90 per cent. of emissions from energy generation. Therefore, I support the amendment, and I hope that the Minister can be positive and see the merit of modestly amending the Billthe amendment will not affect its structuresending out a different signal and opening up a lot of positive response from the industry, science, technology, our engineers and the international community.

Tobias Ellwood: I, too, support this crucial amendmentone of the most important ones that we are discussing today. At this juncture, we can ask ourselves whether the Bill is an opportunity to simply catch up with the rest of the world in respect of CCS or to leapfrog ahead. So I congratulate the hon. Member for Angus on introducing the prospect of including gas as a possibility for CCS.
The feeling among the Opposition is clear, and I think that if we put Labour Members against the wall, they would agree, too. I would be saddened if they were forced by their Whip to deny this opportunity to include such a major improvement to what is considered an adequate and important Bill, but is nevertheless not as strong as the nation expects us to deliver, considering the pressure that we are under to meet some ambitious targets. The Government have talked an awful lot about meeting targets for 2020 and 2050. The idea is to take the action required to ensure that those targets are met. The amendment is a critical step forward.
If we paused for a second and looked at coal, I would be pleased but amazed if any of the processes were up and running by 2014. As the evidence suggests, 2017 seems a more likely date. With that time scale in mind, it seems strange that we are not looking over our shoulder to the other giant contributor to our energygasand realising our desire to ensure that technology is developed and the expertise grows, so that we can harness that technology to capture carbon in the same way as we plan to do for coal.

Anne Main: My hon. Friend makes an extremely valuable point. Does he share my concern that it seems somewhat iniquitous that other producers will be expected to pay the levy and yet will have no opportunity to be part of the investment and the drive forward in such technologies?

Tobias Ellwood: My hon. Friend makes a valuable point. I refer to the intervention of the hon. Member for Glasgow, North-West, who said that coal should be a priority. I do not think that anybody would argue with thatcoal has to be a priority. It is the dirtiest of all the natural resources that we use. However, when does the hon. Gentleman think a Bill might be introduced that will allow us to shift our attention not away from coal, but to include gas as well? I will give way to him, even though he is deliberately avoiding eye contact.

John Robertson: No, I am notI am making it now. I had not sought to catch Mr. Bayleys eye, but I will after the hon. Gentleman has finished.

Tobias Ellwood: The hon. Gentleman obviously wants time to think about the answer. This is, however, a question for the Minister. If the Government are successful in May or whenever the election might be, when will a Bill be introduced that treats gas along the same lines as we are discussing in respect of coal? We on the Opposition Benches are saying that there is an opportunity to allow that mechanismthe legislation that I believe the nation is calling out forto be introduced as we speak. If we do not do it now, we will have to wait for a change of Government. It will be a priority for us, but this will also be seen as a missed opportunity, because we will move from playing catch-up on coal to being behind the curve again on gas.
My hon. Friend the Member for Wealden also said that this matter will have an impact on the other dynamics covered by the Bill, such as the size of the pipes required for the clusters that are likely to develop in key parts of the UK. Including gas in the Bill would have an impact on the issue of the size of those pipeswe will address that later, in another amendmentand would almost oblige us to ensure that those pipes were of a sensible size to include the expected increase in carbon that we would have to transport.
I therefore urge the Minister to consider the amendment carefully. This matter is bigger than the individual agendas and partisan approaches that we sometimes pursue and adopt. It is about meeting our energy requirements in a safe and secure manner and reducing carbon emissions as part of the Government targets. I do not believe that we will meet those targets unless we can give the industry the green light that it needs to include at least one or two demonstration projects on gas as well as coal. I therefore ask her to accept the amendment.

John Robertson: The hon. Gentlemans contribution was very narrow. He seems to be content to think just of the small picture rather than the big one, and the big picture is what is happening worldwide. What happens with gas in this country is important for one reasonsecurity of supply. Do we want to be going down the road of using foreign gas for our needs in years to come? The Government are correct in their assumption that they have to prioritise coal. The question then has to be about how we spend the money on the projects that will take place in the months and years ahead.
Do we spread ourselves thinly by having gas as well as coal, or do we concentrate on coal, which is a priority cost-wise? We have 300-plus years worth of coal in this country; we do not have to go abroad for it. If we can clean the dirtiest coal that is dug out of the ground sufficiently for use, we will suddenly become self-sufficient and have security before we go down any other energy road.

Michael Weir: I do not disagree with what the hon. Gentleman is saying, but the point being made about gas is that we have the gas stations and will continue to have them for at least the next 20 or 30 years. If we are to meet our target, we have to clean them up. We need to deal with that while we wait to get the new CCS coal stations online or we will never meet our carbon targets.

John Robertson: Well, of course there are other ways to meet those targets. The hon. Gentleman and I have had discussions about energy in a few Parliaments, and he knows my opinion that nuclear has to be part of the energy mix and will help to solve the problem.
Mr. Ellwoodrose

John Robertson: If the hon. Gentleman lets me answer that question first, I will let him in. I believe that at this time we have other priorities than to put money into gas. That is not to stop any companies that want to go down the road of investing in a project that they are paying for. We are talking about how much money will come from Government to assist the four projects. I can understand where the hon. Member for Angus is coming from and I believe that we will go down the gas road in the future, but I just do not believe that at this time we should be doing that.
I shall give way to the hon. Member for Bournemouth, East if he still wants to intervene.
Mr. Binleyrose

John Robertson: Well, I give way to the hon. Gentlemans colleague.

Brian Binley: The hon. Gentleman is being very kind. I do not understand the argument, because it seems to me that all we are doing in proposing the amendment is opening up the option. We are not spending any money. We are not committing the Government to any action. We are simply opening up the option should it be opportune at some point.
Why does the hon. Gentleman think that the whole concept of fuel pricing and exploration has suddenly stopped? We know that there are real possibilities in the south Atlantic, specifically around the Falklands, which might be of great benefit to us. I was there only about a year ago. The possibility is exciting. The world is an ever fluid, moving, ongoing place, which is why we should keep our options open, not close them down. I wonder why that would be the case

Hugh Bayley: Order. Interventions need to be short.

John Robertson: I thank the hon. Member for Northampton, South for his very short contribution. I understand what he is saying, but I happen to think that the option is open and has not been closed down. It is not in the Bill, but that does not mean that gas exploration cannot be done. I think that the option is there. It is just that the Government at this time want to put coal first and foremost in the Bill. I think that they are right to do so.

Tobias Ellwood: I am grateful to the hon. Gentleman for giving way; he has been very generous. I do not understand why the measure cannot be included in the Bill. Is it because the Government are being churlish? Is it simply because it was not their idea? I am asking him to stand back from that. The question that I pose to him is whether he recognises that by 2020 all the coal-fired power stations will be either pre-combustion with carbon capture and storage attached to them or obsolete, which means that the massive contribution to our energy needs will be made by gas. With that in mind, when does he see his attention turning to gas? When will he start considering the carbon capture and storage requirements for that part of the energy spectrum?

John Robertson: The hon. Gentleman makes a fair point. I happen to think that with the rules that will, in the years to come, curtail our use of coal as it is at present, and therefore run down our coal-fired power stations, we will be left in a particularly difficult position in which we will have to use gas in large quantities, but it will not be British gas. It will be gas from Russia, the far east or even Africa. I have a problem with that.
Therefore, I want to ensure that although gas will be an important part of the mix, it will not have any kind of sequestration on it; it will be gas as we know it today. We have other ways of going down the road. I believe that coal has to be given priority. I would not have a problem with gas being in the Bill, but then again, I would not argue that it is a necessity for it to be there, either. I do not believe that gas is not there.
Hon. Members want gas to be looked at and they want this to be done, but I disagree with what is being said because as soon as that is written into the Bill, that is what the interpretation will be.

Michael Weir: Will the hon. Gentleman give way?
Charles Hendryrose

John Robertson: I have given way to the hon. Members for Angus and for Bournemouth, East, so there is only one Member I have not given way to and I give way to him now.

Charles Hendry: I am very grateful. I have always found that the hon. Gentleman and I broadly agree on many of these energy issues, and I have a great deal of time for him, but I have just listened to him for five minutes explaining why the measure should not be in the Bill, then he said that he would have no problem with it being in the Bill. No one is suggesting that we add the words gas-fired to the Bill. The suggestion is that we simply remove the words coal-fired.
As the Bill stands, it would be against the law for £1 of the levy to be spent on developing gas CCS; it could go only on coal-fired generation. Therefore, the proposal, which seems eminently sensible, is not to require this to be done on gas, which is what the hon. Gentleman appears to be suggesting, but simply to make that possible so that it could be done without the law being broken.

John Robertson: Another short intervention. I understand what the hon. Gentleman is saying, but he also agreed with me earlier, when I intervened on him, that coal was a priority. Therefore, if coal is the priority, the Government are introducing what I think is a fairly sensible Bill and ensuring that that issue is identified and looked at. That will not stop this being done again in years to come, but I just do not think that gas needs to be written into the Bill just for the sake of doing it. That has nothing to do with whose idea it was, because most of our ideas come from outside industry anyway. I do not see why that has to be a problem.
I will leave it to the Minister to explain why the Bill has been drawn up in such a way. I am sure that it will be clear to everybody and that the hon. Gentleman will withdraw his amendment.

Joan Ruddock: Obviously, this is quite a passionate debate, with people raising many reasons why gas should be included and, as the hon. Member for Angus says, quoting Professor Gibbins at some length.
I have some difficulty here, because it seems to me that there is nothing in the evidence with which any of us would disagree. We urgently need to consider and plan for the decarbonisation of our whole electricity supply. We also need to acknowledge a large part of the supply as gas-fired. However, Professor Gibbins said clearly that we are talking about into the 2020s and looking to 2030, when gas plants will still be in use. Nobody is suggesting that we will not expect to want to have CCS on gas at some point in the future; this is all about where the priority lies.
There is no question but that we would wish to understand CCS on gas. It is clear to me that the potential is there to learn from other projects, notwithstanding that all circumstances, as the hon. Gentleman said, quoting Gibbins, are not identical. However, we expect to be able to learn and that some aspects of CCS and coal in this country would in themselves be applicable to gas, so there is no difference between us in that respect.
The hon. Gentleman seemed to think that there was a contradiction in the national planning strategy on energy. He quoted the provisions on carbon capture readiness, but surely that only reinforces the fact that the Government accept that there will be a need for CCS on gas in the future. That is the sole reason why we have said that carbon capture readiness is a necessary part of consenting to new plant.

Michael Weir: In a sense, I am not disagreeing with the hon. Lady. My point is that, as the national plan is written, no one will get permission for a gas-fired station because the CCS is not ready. How can we demonstrate that carbon capture is ready if the technology does not exist for gas? That is the point.

Joan Ruddock: The fact is that enough is known already about the CCS potential for gas for companies to be able to understand what CCS readiness is. That was indeed spelled out in what the hon. Gentleman read into the record, so it is quite clear that carbon capture readiness is understood, is provided for and can be undertaken, and that planning inspectors will be in a position to make decisions based on what is set out in those plans. There is no contradiction. The issue must surely be whether there is to be experimentation elsewhere. We know that there is; both the hon. Gentleman and I have cited examples of that.
The hon. Member for Wealden referred yet again to the BP plant. It is completely incorrect to suggest that the BP plant was lost due to lack of Government support. Government support for the plant was never directly offered or sought; it was a question of whether it entered itself into a competition, and it decided not to participate when all the details became known. It made commercial decisions that had nothing to do with lack of direct Government support to that plant. There was never a question that the Government would simply subsidise one company in one location dealing with one specific technology.

Phil Willis: With the greatest respect to the Minister, she will know that at the BP Miller field there was encouragement of a single project, together with Scottish Power, at that time. That was the arrangement. It was only when the final decision about funding the project came in that the Governmentvery disingenuouslyinvented a competition. That was what happened, rather than the other way round. BP was certainly in a position to go ahead with that project as a demonstrator.

Joan Ruddock: Neither the hon. Gentleman nor I will know of private conversations that may have taken placeencouragements or otherwisebut I am absolutely clear that there could never have been an intention specifically to subsidise an individual plant. That is why we have the competition.
The other thing I want to say, before I get to the meat of the debate on clause 6, is that everyone has spoken as though CCS were already a proven technology and we could have real certainty about applying CCS to gas through demonstration projects. The whole purpose of demonstration projects is to see whether it is possible to bring CCS to scale and to do it commercially.
At the moment, we are in a very different place from where we could conceivably be by 2020, not least through our own demonstrators in this country. As everyone has acknowledged, they are also taking place in many other countries, not least with EU funding of 12 projects within Europe, where I would suggest things are pretty comparable in terms of their application.

Michael Weir: I think the Minister is missing the point. What do clauses 1 and 6 mean? The whole of the four or five projects will be turned on coal. There is no window for gas, despite its importance to electricity generation in this country. It seems absurd to close off that avenue altogether, without even leaving the possibility of it being helped along.

Joan Ruddock: Let me address those points in a more comprehensive way, as opposed to answering questions. Clause 6 sets out the definitions for a number of terms used in this part of the Bill. In particular, the clause defines the term commercial coal-fired electricity generation which is used throughout part 1. The effect of that definition is that financial assistance, which may be provided by the Secretary of State to CCS demonstration projects and for the future retrofit of CCS to any unabated capacity at such projects, is limited to commercial-scale electricity power stations that are fuelled using coal or coal and biomass. Amendments 16 to 20 would remove all references to coal-fired power stations from the Bill. As hon. Members have indicated, they would therefore broaden the scope of the provision to allow CCS demonstration projects to use any type of fuel, including gas.
As I set out at our evidence session last week, there are strong arguments for prioritising the development and demonstration of CCS technologies for coal power stations. I need to reiterate them as they have been entirely lost from the discussion, except in the case of the excellent contribution from my hon. Friend the Member for Glasgow, North-West, who outlined the many sound reasons why we should pursue coal rather than other fuels.
Coal is the most carbon-intensive fuel and its use is set nearly to double globally by 2030. CCS for coal is the most technically challenging because coal is such a dirty fuel, but CCS for coal is cheaper than for gas. Therefore, for economic reasons, it should be deployed sooner. New clean coal in the UK will provide diversity and flexibility in the energy mix and so help to ensure security of supply.

Phil Willis: I apologise to you, Mr. Bayley, and to the Minister for missing part of the sitting. I was speaking at a college reception elsewhere. It was already a commitment when my hon. Friend the Member for North Southwark and Bermondsey ganged me into coming on the Committee.

Emily Thornberry: Press-ganged?

Phil Willis: He did not press me because I do not allow him to touch me at all, in any shape or form.
There is an important point of principle. There is an assumption, and the hon. Member for Glasgow, North-West made this point, that the Bill will lead to the development of clean coal technologies in the UK and that carbon sequestration in the form proposedand I agree with all the arguments that the Minister has just madewill lead to the resurgence of the UK coal industry.
We have 200 years worth of coal beneath our feet, particularly in an area such as mine in Yorkshire, with some of the largest coal seams going right up to the north-east. The reality is that when the previous Government privatised the electricity industry, the industry became free to buy coal from wherever it liked, as it does now under a Labour Government. It does not buy it in the UK.

Hugh Bayley: Order. Interventions are supposed to be short. This is not a speech, but an intervention on the Ministers speech.

Phil Willis: Oh, is it? I am sorry. I hope that the Committee will agree that it is an important point. I take your guidance because you are a very wise Chairman, Mr. Bayley. I ask the Minister, where in the Bill is there any comfort for the UK coal industry? How can it assume that there will be a reason for the electricity companies to use British coal when carbon sequestration is in place?

Joan Ruddock: I accept the hon. Gentlemans apology for not being here. If he had been here throughout all the sittings, he would have heard me say why I think that there is encouragement to those who might invest in coal supplies in this country. If there was no CCS project funding or framework, there would be no investment in new coal or new coal plants. If we give assurances that there is support and that new coal-fired plant will be built in this country, that will encourage those who mine coal in whatever way in Britain, as they will have a ready market for their product. That is the connection and there is nothing more in a privatised market that anyone would expect a Government to do with legislation.

Phil Willis: It is too dear. It is too expensive.

Joan Ruddock: The hon. Gentleman makes comments that are not relevant to how a Government legislate. I think that I have explained the connections. We are in a free market when it comes to producing the raw fuel.
I was speaking about why coal should be prioritised and I would add the important role that coal-powered stations perform, which is to respond to changing supply and demandfor example, as back-up to intermittent renewables such as wind, or when there are unexpected problems with other power stations. Coal generation can also provide a useful back-up when gas needs to be prioritised for heating for domestic consumers in very cold weather, such as we have at the present time. For us, therefore, coal has many important roles and that is why we seek to include it in our energy mix.

Simon Hughes: Nobody doubts the primacy of coal as a current UK base energy sourcethat primacy is obvious. What I do not understand is why the Minister, through her resistance to these amendments, is obliging Parliament to legislate again if it should wish to come back to this issue to broaden CCS to other energy sources. That seems to be nonsense.
We are trying to reduce legislation, so it is surely better to give an option. These amendments would not oblige anybody to do anything; they give an option. In a minute, we will debate fuel poverty schemes, where the Government have a may provision and not a must provision. Why cannot we have a may provision here, just as we have in the rest of the Bill?

Joan Ruddock: I shall deal with the hon. Gentlemans points in due course. I just want to continue my train of thought about why coal is so important. We have a demonstration programme as part of our wider framework for the development of clean coal, which we published last November. It includes the requirement for any new coal power station to demonstrate commercially the full CCS chain.
If companies are to invest in the new coal power stations over the next decade, we all agree that they will need to have financial assistance to help with the requirements of this regulatory framework. Widening the scope of the demonstration programme to include gas could jeopardise that investment in new coal power stations, as there would be no certainty that all four projects to which the Government are committed would be in coal power stations. I say that advisedly, because the amendments that seek to remove the reference to coal would mean that there could be CCS support for power stations that are fuelled in any way whatever.
We are determined that we will have coal in the mix. Therefore it is obvious that we must have a certain critical number of coal-fired power stations; it is not acceptable to us that there should be a completely open provision in the Bill.

Simon Hughes: We are all keen that we should have CCS in coal-fired power stations. My party is keen on thatas much, if not more, than other parties here today. However, the Minister could deal with her concern by coming back with a counter-proposal that at least three of the developments must be in relation to coal. We are seeking to open the opportunity for CCS in relation to other options, not to drive CCS completely in the other direction. I have given a counter-proposal that the Minister could make. Alternatively, we could make it and she might be able to respond more positively.

Joan Ruddock: The answer to that suggestion is that I clearly would not seek to do that. The hon. Gentleman has just illustrated what is wrong with these amendmentsindeed, what would be wrong, given the priorities that I have clearly outlined, with any other type of amendment that created a situation in which we could get fewer than four coal-fired stations receiving financial support under the levy system.
Of course, hon. Members, including those on the Conservative Front Bench, might like to propose doubling the levy and the number of the projects. However, the fact is that we think that it is a sustainable proposal to have four coal-fired power stations that can adopt CCS under the provision, given the amount of money that we think is reasonable to raise and consumers can reasonably bear. If we think that four is the right number, and that the sum of money is of the right order, it is essential that those four power stations are coal-fired ones, because coal is the priority for the reasons that I have indicated. It is also a critical priority to keep a significant amount of coal in the mix. Even with four CCS coal-fired stations, which would be capable of running into the 20s and beyond, we would still have a much reduced coal capacity compared with what we have today.

Tobias Ellwood: The Minister continues to make a powerful argument as to why we should have carbon capture and storage for coal, but she is not making the case as to why we should not have it for gas. She is repeating the same message that we received a couple of days ago.
I think that the Minister wants to protect the coal industry. If we were cynical, we would see that we are importing more coal than we are digging up in the UK. As that continues, we are supporting the import of even more coal. By denying the opportunity to include gas, the Minister is protecting the coal industry, with the effect of denying the opportunity for gas to catch up with carbon capture and storage. That is what is happening, and that is underlying the message that we are getting.

Joan Ruddock: I have to tell the hon. Gentleman that nothing is further from the truth. If he is against imports, he must be against gas, because half the gas that we use in this country is imported.
What I have said clearly is that for energy security needs, global needs and a whole range of reasons, we want to see coal in our energy mix, and we want to have it with CCS fitted if possible. If we are to have four projects and raise the money that we have proposed, we need to ensure that those projects are coal. Therefore, it is not enough to suggest that it would be okay to have three. We believe that in the future we will need that amount of coal-fired generation with CCS. The programme will do exactly that. There is no way that we will seek to have fewer projects to bring gas in.
May I say something about gas? There is no question of our accepting amendments that would diminish our commitment to coal. We seek not to protect any aspect of the energy industrywe have a free and privatised marketbut to get the energy mix right. The issue is about the energy mix.

Tobias Ellwood: I do not understand how the Minister can say that we would diminish the efforts that we are placing on coal. At the end of the day, she and the office of carbon capture and storage will decide where the money will go, regardless of what bids are proposed. The question that I posed to her is the same as the one that I posed to the hon. Member for Glasgow, North-West. When does the Minister think that a Bill will come through that will allow the introduction of demonstration projects on carbon capture and storage for gas?

Joan Ruddock: I find myself in some difficulty, because I am becoming repetitive.

Tobias Ellwood: It is a simple question. When will a such a Bill come forward?

Hugh Bayley: Order. The Minister is responding.

Joan Ruddock: Let me be absolutely clear: we want four coal projects. If we removed references to coal, it would open the field to projects that are not coal. That is the simple logic. I imagine that it could even be the subject of a legal challenge if the Government then said that any field could be included, but we had chosen only coal. The hon. Member for Bournemouth, East would then say that we were favouring the coal industry over every other industry. We are being honest, straightforward and saying exactly what we seek to achieve with the Bill. That is why I am resisting the amendments.

Judy Mallaber: Is there anything in law to prevent a demonstration project for gas from taking place if it did not require the levy? How much would it cost to have a fifth project that involved gas with a levy?

Joan Ruddock: Any company that sought to develop any project of any size could do so if it used its own resources. Gas-fired stations could therefore become pilots for CCS. However, the Bill will establish a levy, so, as my hon. Friend rightly asks, what would it mean to produce an additional amount of money to fund an additional station? We have indicated that it costs between more than £7 billion up to £9.5 billion to support four coal-powered stations, so it would be easy to work out what it would cost to support a fifth station if we thought that the sums of money were equivalent, but that is something that we cannot say. We believe, however, that gas would be more expensive than that, thus significantly increasing the levy and consumer bills.
Timing is another issue. I have given many reasons why coal should be a priority, but surely timing is an additional reason. The timing is very important, because coal is so polluting. Coal-fired stations will have to close down for a variety of reasons under other legislation. If we are to replace and retrofit coal, we have to do it in the coming decade. That is clearly the absolute priority. However, we can accommodate gas to a large degree and for a longer period within the emissions limits that we have set this country.
We are considering CCS for gas at a later stage. Once that is clear, it will be possible to have a debate about whether we need a levy system to support gas at some point in the future. Moreover, do we think that, by the 2020s, the carbon price and technology learning might be such that a levy would be commercially viable in its own right? None of those things is known today. There is no denial of the needs of gas, but they are in a different time frame, and we have time in which to make those decisions.

Alan Whitehead: Does my hon. Friend agree that that is precisely the point made in Professor Jon Gibbinss note to the Committee about the time scale for gas and the extent to which coal-fired stations would not be built as a result of the large plant directive? Does she also agree, in view of a recent study by Centrica, that the potential to place renewable gas into the gas supply system is considerable? It would further mitigate the carbon emissions of gas and therefore place it further back in relation to the priority of CCS.

Joan Ruddock: My hon. Friend, as always, makes cogent arguments, and I am grateful for his support.

Anne Main: I am reading with interest the fact that the Bill mentions only four projects and that anything else seems to be envisaged in a potential new Bill. That is wasteful legislation. It would be so much easier if the Minister considered a similar phraseology to that about the administrator and put something like may at some point include other fuels. That would simply remove the need for another piece of legislation in future.

Joan Ruddock: The hon. Lady proposes something that is not before us. We are debating the amendments that remove all reference to coal. I hope that I have by now made my position clear on that matter.

Simon Hughes: I understand the Ministers argument. Can I be clear, however, that there is also one other bit of mutual understanding? Is it the Ministers wish that, as a result of her four demonstration projects, we will have the technology to ensure that all future coal-fired power stations, or continuing coal-fired power stations that carry on past 2020 or thereabouts, will use CCS? This is only a demonstration, so that the whole of the industry can use it. I hope that that is the common understanding. There will potentially be many more than four coal-fired power stations, but there will simply be four places where they trial and work up to final projection, so that everybody can then nick the technology and use it for the future. That is what she means, is it not?

Joan Ruddock: Yes. We need to be clear, however, that we are talking about support through a levy that is specific to demonstrations. We have includedthis is criticalthat if decisions were taken to this effect, the levy system could further provide for bringing the whole capacity of the demonstrator stations up to 100 per cent. of CCS.

Tobias Ellwood: So it is not just fourthe levy keeps on being paid.

Joan Ruddock: No, no. It is the four.

Tobias Ellwood: Does it say that in the Bill?

Joan Ruddock: I am explaining that the Bill will create all the frameworks. It will create the possibility of having the levy and all that goes with it. We have said clearly that we believe that that is required for coal-fired, pre and post-combustion. In addition, when the demonstrator shows, as we hope that it will, that the different stations can function and that it will be possible to move to 100 per cent. coverage, the levy system could be used to support the retrofitting of the rest of the stations.
We have not got a provision in the Bill, or an intention that would come through regulations, to do other things with the levy. The levy is limited to what I have just described. As for other stations, learning and bringing retrofits would be a matter for the market at the time. We have a rolling review going forward to 2018, so we will be able to see what else may or may not be required to support CCS.
Several hon. Membersrose

Joan Ruddock: One, two, three and four, and then I want to make progress and not give way any more.

Simon Hughes: I hope again that there is common agreement that the Minister would say that the Governments strategy, which we would support, is that once the technology and the demonstration has been established as working, the next generation of coal-driven power stations would not seek or be given any Government subsidy or levy by collection, because the technology will already have proved successful. The idea is to prove that it can work and then leave the markets to pay the full price. That is what I assume the Minister is saying.

Joan Ruddock: I think that I may have said that this morning.

Phil Willis: It has been helpful for the Minister to make clear the Governments position, but I take her back to a key point. She said two things this afternoon: first, she said that Government policy is to do with energy security, then she said it is to do with the energy mix. Energy security means that the source of the energy is controlled by the UK. That is why we have gone partly into nuclearwe can control that source, which involves small amounts of nuclear material. Coal brings me back to the point made by the hon. Member for Glasgow, North-West: unless we use UK indigenous coal, we do not have energy security in the sense that the Minister talked about nuclear energy. Would the Minister welcome an amendment, or perhaps the Government could table a proposal, stating that those four demonstratorsthey are being paid for by a levy, which is on UK customers onlywould have to use UK coal as part of that demonstration?

Joan Ruddock: My guess is that we would contravene some trade laws if we attempted to do that, so there would be no question of doing it. However, if we do not produce the levy and enable coal to be clean, there will be no future for the UK coal industry. That is the way that we

Phil Willis: That is a different issue.

Joan Ruddock: No, no. This is important, because it is about incentivising the industry and we incentivise it by making that change. The hon. Gentleman says that we have no energy security, but energy security is based on the fact that some of the coal is produced here. There is the potential for more to be produced here. In addition, achieving the mix means better security in terms of generation and protecting against failures in other plant.

John Robertson: The problem with coal-fired power stations is the type of coal that has to be burnt. The dirtier coal is not suitable for our power stations at the moment and therein lies the problem. However, that should be looked at in the future, so that we use UK coal.
Will my hon. Friend the Minister tell me when the EU emissions directive comes in for coal-fired power stations? One problem that I am aware of is that 2015 was a deadline for some of the power stations to be closed down if they did not meet the criterion of being clean enough. Longannet is one of those power stations and is the biggest in the nearest trial area to me. Do we have a problem in that, even though we get those trials, we will have to start to shut down coal-fired power stations?

Joan Ruddock: That is indeed my understanding. From recollection, I said this morning that I thought five coal-fired power stations would have to close by 2015. Nobody has corrected me, unless this piece of inspiration is a correction. No, I am right. Five coal-powered stations will have to close by the end of 2015 as a result of the large combustion plant directive. I am afraid that that is the case, but it has always been what we expected to happen.
We are looking forward to make it possible for replacements to occur and for new coal to come on stream. Given that a third of the coal used for generation in coal-fired power stations is produced in the UK, we think it important to secure the future for that production. I thinkagain, I speak from memorythat about 6,000 people are employed in that industry.

Charles Hendry: The Minister has been very generous in giving way. We completely agree with her that coal is a priority. We completely understand that the focus will be on coal. However, this technology is moving fast. We have some of the most innovative companies in the world involved in gas in the UKBP, Shell, Centricaand they are developing how CCS could be applied to work with gas as well.
Essentially, the Minister is saying that because she insists that the levy can only ever be used for coal-fired generation, it is not really worth those companies doing that work in this country unless they can do it entirely without support. We are not trying to move her away from the prioritywe accept itbut in a world where it is likely in 2020 that 50 or 60 per cent. of our electricity will come from gas, surely it makes sense to include that ability in time to use the levy for the development of gas CCS, rather than requiring new legislation.

Joan Ruddock: There is a real difficulty in responding. I understand where the hon. Gentleman is coming from, but we made a decision about the number of projects and the size of the levy that can be raised and is sustainable. At the moment, we cannot move away from that to include additional stations at some time in the future. We cannot look further forward and do not seek to commit more money through a more punitive levy. Given those limits, which are appropriate, four coal-fired power stations are appropriate.
I see the hon. Gentlemans point about not passing primary legislation again to include gas. If it were that simple, I would be attracted to the proposal, but we cannot, at this stage, envisage that the same mechanism would be appropriate at a later date. How much would be required, how many stations and what kind of technology would be appropriate for gas? There is more than one possible technology, as he knows.
We are not dealing with legislation that we can add gas on to. If gas is to be supported at some later stage, that will require primary legislation because there will be many other factors involved. This matter is not as simple as the Bill in its current form becoming applicable to gas. As I have said repeatedly, we are talking about a 15-year cycle and the rolling review process will determine when it is appropriate to look at further applications of CCS.
I do not think that I can satisfy the hon. Gentleman, but I hope that I have at least made it clear where the Government stand. That is not to say that we do not recognise the fact that to decarbonise electricity supplies fully, we may also need CCS for gas. As I said, our requirements for carbon capture readiness extend to all power stations over 300 MW, and that includes gas.
We are putting in place measures that will enable us to move relatively quickly to CCS on gas power stations at some point in the future. I have made the point, and I think I need to repeat it, that we should not forget that there are other demonstration projects in Europe and globally. We expect that those will include some demonstration of CCS on gas generation.
Facilitating the global roll-out of CCS to the levels required to tackle climate change will require global co-operation. Therefore, we expect that the benefit from the learning developed by demonstration projects in other countries, in the same way as we intend to share the learning developed here, will be an important aspect of the overall development of CCS.
For the reasons I have laboriously set out, we do not intend to provide financial support for the demonstration of CCS using gas-fired generation in the near future. Consequently, I do not believe it necessary to widen the provisions of this part of the Bill in that respect. I hope, therefore, that the amendments will not be pressed to the vote.

Michael Weir: We have had a full debate on the issue and poked it from every possible angle, but I still do not understand the Ministers position. We all agree that the priority is coal. There is no dispute about that and it is clear that the first demonstrator will be coal. All the amendments would do is open up the possibility of also looking at gas, if that proved a more attractive option.
The Minister tells us that there is research on gas CCS being done throughout the world, but, as I mentioned earlier, the same can be said of coal. We do not know which will be the most attractive technology. It seems to me that the Government are doing exactly what they tell us they never dopicking winners among technologies.
This is not an attempt to undermine research on coal or an attempt to put gas in the Bill. It is merely an attempt to leave our options open, given, as we said earlier, that 42 per cent. of our electricity already comes from gas. This is an issue that we need to look at, and I would say that we need to look at it in the relatively near future.

Alan Whitehead: Does the hon. Gentleman appreciateI am sure he doesthat we are talking here about a levy for a specific purpose, which is to get the most bang for the buck, as it were, in bringing on to viability a technology that will make any form of mineral-based power generation acceptable in the low-carbon economy? That is what this measure is about. Therefore, it seems to make a great deal of sense to go first for coal. We know that coal is much more carbon-intensive than gas, we know that we have to get this carbon capture technology in place rapidly and we know that such technology can be applicable to other forms of generation if it can be shown to work.
Under those circumstances, therefore, I would have thought that matching a levy, which we presumably wish to boundwe have already said that we wish to bound itwith a number of projects that prioritised coal in such a way would benefit gas, because the levy would show how that mineral-based energy generation could continue to be part of the fuel economy. In any event, clause 6(4)(b) says by coal and biomass, which may be of relevance to the hon. Gentlemans argument.

Hugh Bayley: Order. I should warn the hon. Gentleman and one or two other hon. Members that interventions are meant to be short. I call Mr. Weir.

Michael Weir: I respect what the hon. Gentleman is saying, but I think that he has got it wrong. The whole point is that it is a levy; it is money from consumers to set up CCS and get it going. All I am saying is that we should leave our options open as to what is the best value for the consumer to get CCS going. It may or may not be coal, but we will have two demonstrators in the first competition anyway. It will be either Longannet or Kingsnorth. Coal will start this process off, but we must have the option open to look at gas.
The hon. Member for Glasgow, North-West talked about importing gas. There is a lot of dispute about whether we will also end up importing coal. However, I ask him to look at what his own Governments overarching national policy statement on energy says about gas production and imports. By 2020, gas imports will probably represent the same percentage as they do now because it is projected that there will be a reduction, although we will still be using a lot of gas from the North sea.
Gas is and will remain important. We need to decarbonise it just as we need to decarbonise coal. It is short-sighted not to leave the option open at least. I am not saying that we should concentrate on gas; I am saying that we should leave the option open. It will be up to the authority to decide in the end which projects get help from this levy.
I am not satisfied with what the Minister has said and I would like to push this matter to a vote. It is an important principle in the Bill.

Question put, That the amendment be made.

The Committee divided: Ayes 5, Noes 9.

Question accordingly negatived.

Clause 6 ordered to stand part of the Bill.

Clause 7 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.(Steve McCabe.)

Adjourned till Thursday 14 January at Nine oclock.